FTC roundup

There are two primary branches of the Federal Trade Commission (FTC), the competition/antitrust branch and the consumer protection branch. According to John P. Feldman, partner at Reed Smith, the FTC has been focused on a number of topics related to consumer protection, taking a look at diet, health and weight loss claims; issues of disclosure, especially as they relate to advertising substantiation issues; changing technology related to disclosure issues, such as the difference between advertising and editorial content; and matters of privacy and big data. Here are the top four consumer protection issues that are top-of-mind at the FTC and what inside counsel need to know about them.

1) Privacy

“Privacy is a matter of enormous interest,” explains Feldman. “Over the last 20 years or so, the FTC has not focused on privacy in and of itself, but rather relating to advertising and substantiation. Privacy is thought of as a representation of those. If you can’t live up to your promises, that is a deceptive practice.”

The FTC is taking the position that consumers are entitled to believe that companies are instituting reasonable precautions, that they are addressing internal and external risks and doing their homework, looking at pressure points in different areas, such as weak links in the supply chain. The FTC expects companies to do their homework and put in those adequate precautions that consumers expect.

2) Big Data

Closely linked with the privacy issue is a concern about the enormous amount of data collected by businesses in this day and age. “Big data – how do companies capture information, categorize it and hold onto it, and for how long?” Feldman notes. “Those issues are independent of representations. People have no idea this is being done. It’s completely hidden from the consumer, at least in the FTC’s mind.”

Data collection is so ubiquitous, especially with regards to mobile devices, that it has become a broad area of focus for the FTC. The commission is fighting a battle of whether it can be in the business of promoting good safeguarding of sensitive data, and recent cases regarding Wyndham and LabMD have shown this dedication.

3) Health and drug claims

Two different parties are involved in monitoring drug claims: the Food and Drug Administration (FDA) and the FTC. While prescription drugs are regulated by the FDA, the FTC concerns itself with over the counter drugs or dietary supplements.

“From the FTC perspective, lack of substantiation is the key,” Feldman explains. The FTC wants to know if drug companies have the correct level of substantiation for all advertising claims. This requires research that is not just peer reviewed, as the FTC has taken issue with research in peer-reviewed journals. “The FTC’s standard is not peer review,” he says. “It’s whether the substantiation is competent and reliable. Would researchers or experts in the field rely on this kind of research?”

4) Credit

The last issue high on the priority list for the FTC is credit. Are private companies using credit information willy-nilly in ways that do not conform with federal statutes? This happens frequently, says Feldman, when there is a breach or an inappropriate upload of information. The question of what the statutes should be, and whether these concerns will be addressed by executive actions or Congressional mandate remains to be seen. In the meantime, the FTC is at a risk of overstepping its bounds, as it did in the 1970s in the areas of children’s advertising. It must tread lightly here, at risk of being defunded once again.